What is spread pricing in pharmacy benefits and how does it cost employers money?

Spread pricing occurs when a PBM charges the employer more for a drug than it pays the pharmacy, keeping the difference as profit. For example, a PBM might pay a pharmacy $10 for a generic drug but charge the employer $25, keeping $15 in spread. Employers can eliminate spread pricing by requiring pass-through pricing in their PBM contracts, where the employer pays exactly what the pharmacy is paid plus a transparent administrative fee.

How much can employers save by renegotiating their PBM contract?

Employers typically save 15–30% on pharmacy costs by renegotiating PBM contracts to include pass-through pricing, full rebate disclosure, and transparent administrative fees. The savings depend on the current contract terms, drug mix, and rebate structure. Generic drug optimization alone can reduce pharmacy costs by 5–10% by improving generic dispensing rates.

What is a drug rebate and should employers receive them?

Drug rebates are payments from pharmaceutical manufacturers to PBMs in exchange for favorable formulary placement. In traditional PBM contracts, the PBM keeps most or all of these rebates as additional profit. In pass-through or transparent contracts, rebates flow directly to the employer. Employers should require full rebate pass-through in their PBM contracts to capture this value, which can represent 20–40% of brand drug costs.

PBM Savings Calculator | Employer Benefits IQ

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PBM Savings Calculator

Identify pharmacy benefit savings opportunities across generic optimization, specialty management, spread pricing, and rebate pass-through.

Rules-Based™

Benchmark data: August 2026

Updates BPS: Pharmacy Benefits & Cost Management

Current program data

Pharmacy Spend

Employees200

252,000

Annual Rx Spend$480,000

Total pharmacy benefit spend (employer + employee)

$50,000$5,000,000

Specialty Drug % of Spend42%

Industry avg: 40–50% of Rx spend

10%80%

Current contract performance

PBM Contract Terms

Generic Fill Rate72%

Benchmark: 88–92%

40%95%

Mail Order Usage18%

Benchmark: 30–40% for maintenance meds

5%60%

PBM Spread Pricing %12%

Difference between what PBM charges vs pays pharmacy

0%30%

Rebate Pass-Through %40%

% of manufacturer rebates returned to plan

0%100%

Total Savings Opportunity

$157,968

annual estimate

Savings as % of Rx

32.9%

of current spend

Cost Per Employee

$2,400

PEPY current

Industry Benchmark

$2,200

PEPY avg

vs. Benchmark

+$200

above/below avg

Specialty Spend

$201,600

42% of total

Ranked opportunities

Savings by Strategy

Rebate Optimization

100% rebate pass-through to plan

$51,840

Spread Pricing Elimination

Move to pass-through pricing model

$46,080

Specialty Drug Management

Carve-out, white-bagging, biosimilar substitution

$44,352

Mail Order Expansion

Increase maintenance med mail order to 35%

$12,240

Generic Fill Rate

Close gap to 90% generic fill benchmark

$3,456

Where you stand

Performance vs. Industry Benchmarks

MetricYour PlanBenchmark

Generic Fill Rate72%90%

Mail Order Usage18%35%

Specialty % of Spend42%42%

Rebate Pass-Through40%100%

Spread Pricing12%0%

Savings estimates are based on industry benchmarks and published PBM audit findings. Actual savings depend on contract terms, formulary design, and member behavior. A PBM audit is recommended before contract renegotiation.

Benchmark assumptions used in this calculator

Full methodology

Generic fill rate target90%EBIQ best-practice benchmark; top-quartile self-funded plans (PBMI Drug Benefit Report 2024) EBIQ Best Practice

Mail order usage target35% of maintenance RxIndustry median for self-funded plans with active mail order incentives (Mercer 2025) Statistical

Specialty drug savings rate22% of specialty spendWeighted average savings from carve-out, white-bagging, and biosimilar substitution programs (HCCI 2024; published PBM audit findings) Statistical

Spread pricing estimate8–12% of Rx spendFTC Pharmacy Benefit Managers Report (2024); Ohio Medicaid audit findings; independent PBM audit averages Public source

Industry PEPM benchmark$2,200/yearMilliman Medical Index 2025 — employer-sponsored plan average total cost per covered employee Statistical

Generic fill rate savings rate$8 PEPM per 1% improvementEBIQ analysis of published PBM audit results and actuarial studies; consistent with PBMI and Segal benchmarks EBIQ Analysis

Source types: Statistical = named national survey data · Public source = regulatory filings or government reports · EBIQ Best Practice = EBIQ consulting framework · EBIQ Analysis = derived from published audit findings. Full benchmark methodology →

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Estimated annual pharmacy savings opportunity

$157,968

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Independent review

Corry Hull, REBC® CSFS®

Independent benefits consultant · Health Rosetta Advisor

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Your estimated savings opportunity is $157,968/year.

Corry Hull, REBC® CSFS®, reviews results like these with employers regularly. Independent analysis, fully disclosed compensation — just an honest read on what the numbers mean for your plan.

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Frequently Asked Questions

What is PBM spread pricing and how much does it cost employers?

PBM spread pricing occurs when a pharmacy benefit manager charges the employer more for a drug than it reimburses the pharmacy, keeping the difference as profit. Spread pricing is most common in Medicaid managed care but also occurs in commercial plans. Employers can eliminate spread pricing by requiring pass-through or transparent pricing contracts, where the PBM charges only its administrative fee and passes all drug costs through at actual cost.

What is a good generic fill rate for an employer health plan?

A generic fill rate of 85–92% is considered strong for most employer health plans. The national average is approximately 88–90%. Every 1% increase in generic fill rate saves approximately $8 PEPM (per employee per month). Employers below 85% generic fill rate have significant savings opportunity through formulary management, step therapy, and member education.

How much can employers save by improving rebate pass-through?

Rebates represent approximately 15–20% of brand drug spend for most employer plans. Many PBMs retain a portion of rebates as profit rather than passing them fully to the employer. Moving to 100% rebate pass-through can recover significant dollars — the exact amount depends on your brand drug mix and current contract terms. This calculator estimates your rebate optimization opportunity.

What is specialty pharmacy carve-out?

A specialty pharmacy carve-out separates specialty drug management from the primary PBM contract, directing specialty prescriptions to a dedicated specialty pharmacy or carve-out vendor. Specialty drugs represent 1–2% of prescriptions but 40–50% of pharmacy spend for most employers. Carve-out arrangements can reduce specialty costs by 20–30% through better pricing, white-bagging, and site-of-care optimization.

How do I audit my PBM contract for savings opportunities?

A PBM contract audit examines pricing guarantees (AWP discounts, dispensing fees), rebate pass-through provisions, spread pricing language, audit rights, data access, and termination provisions. Employers should conduct a PBM audit every 2–3 years or at contract renewal. The PBM Contract IQ™ tool at www.employerbenefitsiq.com/tools/pbm-contract-review can identify red flags in your current agreement.

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